Confidentiality Agreements

by David K. StaubStaub Anderson LLC

There are many ways to protect a business' intellectual property. The legal tools available to the owner of intellectual property include patents, copyrights, trademarks, and trade secret law. Each of those tools serves a unique and distinctive purpose. None of those tools, however, is a substitute for a well-crafted confidentiality agreement between two parties.

Patents. Patent protection is very valuable but it is also very limited. Patents only cover inventions which are "reduced to practice" and meet the myriad of other requirements under patent law. Commercial information exchanged between two parties would rarely, if ever, be patentable.

Copyrights. Copyrights protect only the expression of an idea and NOT the underlying idea or information. For example, if a company creates a new type of software program, the source code is protected by copyright but anyone can look at the idea and write their own program to achieve the same result. Copyright registration is not required to create the copyright, but has added benefits.

Trademarks.Trademarks do not protect ideas or information. Trademarks protect the owner against someone else selling the same or similar good or services in a way that creates confusion about the origin of the goods or services. The idea for the product and even its specifications are not protected.

Trade Secrets.Trade secrets laws in the various states do protect certain types of confidential information. However, courts generally interpret the definition of "trade secrets" very narrowly. Information that a party considers to be confidential often fails to meet the test of a "trade secret."

While the other legal tools which protect intellectual property are important, they are rarely a complete substitute for a confidentiality agreement between the parties. Even where those tools apply, parties often use confidentiality agreements to fill the gaps.

What Should the Confidentiality Agreement Contain?

To be meaningful, careful thought and analysis must go into the drafting of the confidentiality agreement. At a minimum, the confidentiality agreement should identify:

the parties to the agreement

the purpose of the disclosure

the type of information considered confidential

the permitted uses or disclousre of the confidential information

the term or duration of the confidentiality obligations

the provisions for return or destruction of the confidential information